Regulators of MBS markets should use a variety of tools to address inverse incentives in securitization, encourage markets to improve transparency and increase document standardization, according to a report released by the Joint Forum of the Bank for International Settlements. In its “Report on Securitization Incentives,” BIS said incentives in securities markets were misaligned in the crisis and still are today. “The major incentives at play for originators/sponsors included funding diversification, funding cost, risk transfer ...

Hedging will become much more expensive for Fannie Mae, Freddie Mac and the Federal Home Loan Banks than for anyone else as proposed new rules on the margining of uncleared derivatives will significantly increase the cost of trading, the GSEs warned federal regulators.GSEs regulated by the Federal Housing Finance Agency weighed in via comment letters on the rules proposed in April by the FHFA, as well as the Federal Reserve, the Farm Credit Administration, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

It’s been one year since the Dodd-Frank Wall Street Reform and Consumer Protection Act has been enacted, and industry representatives remain anxious about the negative effects they expect the legislation will have on the mortgage market and the cost and availability of mortgage credit. Coming up with any new mortgage products at all will be one of the numerous challenges posed by Dodd-Frank, thanks in particular to the burdensome, 5 percent risk-retention requirement, according to Larry Platt, a partner with law firm K&L Gates in Washington, DC. “Under the Dodd-Frank risk-retention requirement, there’s ...

Loan servicers must deal with increasing paperwork and time demands, and they are often unequipped for new reporting requirements resulting from the Dodd-Frank Act. Firms such as SourceHOV say they can provide servicers with a strategy for dealing with the additional work new regulations are creating. One of the more onerous requirements is the need to handle qualified written requests. Servicers are also required to acknowledge receipt of any request. “Servicers really have two options when it comes to compliance,” said Michael Zwall, the director of mortgage services for SourceHOV, a consulting firm. “First, a servicer can decide to develop ...

Illinois Governor Pat Quinn (D) announced late last week the creation of a special fund that will use the state’s allocation of federal Hardest Hit Fund dollars to purchase distressed loans in the Chicago area and permanently modify them to affordable levels. The Mortgage Resolution Fund will extract $100 million of Illinois’ $445.7 million of HHF resources for the cause. The MRF will buy delinquent loans from lenders and capital markets trading desks at net present value, and each qualifying debt will be “brought into alignment with current values.” Chicago has suffered a ...

The Federal Housing Finance Agency is seeking comments on a long-awaited, recently-proposed rule to establish prudential standards relating to the management and operations of Fannie Mae, Freddie Mac and the Federal Home Loan Banks.The Housing and Economic Recovery Act of 2008 requires the FHFA director to establish standards that address 10 separate areas relating to the management and operation of the GSEs and FHLBanks and authorizes the director to establish the standards by regulation or by guideline.

The Consumer Financial Protection Bureau, a potential nemesis regarded warily by the mortgage finance industry, officially opened for business this week without a Senate-confirmed director, but not without new brouhaha over the position. President Obama nominated Richard Cordray, the CFPB’s chief of enforcement, to be the first official director of the new agency. Prior to joining the bureau in January, Cordray was the Ohio attorney general for two years. Before that, he served for two years as Ohio’s state treasurer. It came as no surprise that Obama did not ...

Republican senators this week renewed their vow to block confirmation of a permanent director of the new Consumer Financial Protection Bureau unless the Obama administration agrees to revamp key parts of the agency’s structure and make it more accountable. Some, like Adam Levitin, a law professor at the Georgetown University Law Center, believe the CFPB is actually more accountable than any other federal agency. During testimony at a hearing in the Senate Banking, Housing and Urban Affairs Committee this week, he noted that the CFPB is subject to ...

Most mortgage loans made in recent years meet several of the major requirements to be classified as “qualified mortgages,” but debt-to-income tests could be problematic, according to a new Government Accountability Office report released this week. Loans that meet nine provisions specified in the Dodd-Frank Act would be classified as qualified mortgages and provide the lender some legal protection that the new law’s ability-to-repay standard has been met. The Federal Reserve has proposed a regulation to implement the DFA requirements but left some key issues – such as ... [includes one data chart]

The Office of the Comptroller of the Currency made significant changes to a controversial proposed regulation it issued back in May to implement revised federal preemption standards regarding state mortgage and other consumer protection laws. The OCC’s proposed rule to conform to Dodd-Frank Act preemption provisions was met with significant opposition from state regulators, consumer advocates, members of Congress and even the Department of Treasury, within which the agency functions as an independent bureau. One of the key disputes focused on the OCC’s proposal to use a ...